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HMRC internal manual

Double Taxation Relief Manual

From
HM Revenue & Customs
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DT: Barbados: double taxation agreement, Article 9: Dividends

Article 9 was substituted by SI73/2096 below

-1

(a) Dividends paid by a company which is a resident of the United Kindom to a resident of Barbados may be taxed in Barbados.

(b) Where a resident of Barbados is entitled to a tax credit in respect of such a dividend under paragraph (2) of this Article tax may also be charged in the United Kingdom, and according to the laws of the United Kingdom. on the aggregate of the amount or value of that dividend and the amount of that tax credit at a rate not exceeding 15 per cent.

(c) Except as aforesaid, dividends paid by a company which is a resident of the United Kingdom to a resident of Barbados who is subject to tax in Barbados on them shall be exempt from any tax in the United Kingdom which is chargeable on dividends.

(2) A resident of Barbados who receives dividends from a company which is a resident of the United Kingdom shall, subject to the provisions of paragraph (3) of this Article and provided he is subject to tax in Barbados on those dividends, be entitled to the tax credit in respect thereof to which an individual resident in the United Kingdom would have been entitled had he received those dividends, and to the payment of any excess of such credit over his liability to United Kingdom tax.

(3) Paragraph (2) of this Article shall not apply where the recipient of the dividend is a company which, either alone or together with one or more associated companies, controls directly or indirectly at least 10 per cent of the voting power in the company paying the dividends. For the purposes of this paragraph two companies shall be deemed to be associated if one is controlled directly or indirectly by the other, or both are controlled directly or indirectly by a third company.

(4) Dividends paid by a company which is a resident of Barbados to a resident of the United Kingdom who is subject to tax in the United Kingdom in respect thereof shall be exempt from any tax in Barbados which is chargeable on dividends in addition to the tax chargeable in respect of the profits or income of the company.

(5) Subject to the provisions of paragraph (5) of Article 10 and paragraph (5) of Article 11 the term `dividends` includes any item which, under the law of the Contracting State of which the company paying the dividend is a resident, is treated as a distribution of a company.

(6) If the recipient of a dividend is a company which owns 10 per cent or more of the class of shares in respect of which the dividend is paid, then paragraphs (1) and (2) or, as the case may be, paragraph (4) of this Article shall not apply to the dividend to the extent that it can have been paid only out of profits which the company paying the dividend earned or other income which it received in a period ending twelve months or more before the relevant date. For the purposes of this paragraph the term `relevant date` means the date on which the beneficial owner of the dividend became the owner of 10 per cent or more of the class of shares in question.

Provided that this paragraph shall not apply if the beneficial owner of the dividend shows that the shares were acquired for bona fide commercial reasons and not primarily for the purpose of securing the benefit of this Article.

(7) The provisions of paragraphs (1) and (2) or, as the case may be, paragraph (4) of this Article shall not apply where a resident of a Contracting State has a permanent establishment in the other Contracting State and the holding by virtue of which the dividends are paid is effectively connected with a business carried on through that permanent establishment. In such a case the dividends shall be treated as if they were industrial or commercial profits to which the provisions of Article 6 are applicable.

(8) Where a company which is a resident of a Contracting State derives profits or income from sources within the other Contracting State, that other State shall not impose any form of taxation on dividends paid by the company to persons not resident in that other State, or any tax in the nature of an undistributed profits tax or undistributed profits of the company by reason of the fact that those dividends on undistributed profits represent, in whole or in part, profits or income so derived.